I Am Selling Base Carbon (BCBN)

An explanation why.

I have been an investor in Base Carbon (BCBN.NE) for around three years now.

Most of the people holding the company received their initial shares as a dividend through Abaxx Technologies (ABXX) when they spun out the business.

At the time, the Russian invasion of Ukraine was just kicking off.

That event, and the subsequent economic turmoil, killed any momentum the carbon credit space had.

This was only exacerbated by The Guardian releasing a popular article arguing that over 90% of REDD+ credits registered with Verra were likely fraudulent. A critique that shattered trust in the voluntary carbon markets (VCMs).

Since then, we watched Base go from an unprofitable startup, to:

• Reaching profitability.

• Buying back shares through an NCIB.

• Owning several 10-year lifespan cash-flowing projects.

• Already receiving FULL PAYBACK on one of those projects.

• Partnering with STX Group to launch a fund (still in the works).

And that isn’t even an exhaustive list.

Most micro-caps never achieve anything to this extent, especially not in such a short time…

How has the market rewarded these accomplishments?

I am down 30% on the stock as I write this.

It has become clear to me that nothing this company does will matter if the sentiment in the broader VCMs remains this abysmal.

The only hope of seeing significant capital appreciation any time soon is a buyout from a corporate buyer who wants the carbon credit portfolio. Probably one of the airlines.

Any chance of this happening was likely delayed by CORSIA banning the methodology Base’s cookstove projects are currently using. To be eligible, those projects would need to upgrade to Verra’s new VM0050 methodology for cookstoves.

We don’t know if the project developers Base is working with want to transfer to that methodology yet.

The stock is in total limbo, and I see no reason for this to change.

Sentiment could not be worse with the election of Donald Trump.

Every climate-conscious head of any of the governmental agencies is getting shown the door. Not a surprise.

In the grand scheme, carbon credit demand has actually been stable or growing this whole time. Corporate involvement in these markets has not slowed down.

Supply has begun to constrict as buyers demand quality, verifiable credits— Verra has become an unprofitable organization because of the decline in credit issuances.

So, the supply and demand situation is arguably the best it has ever been…

But it doesn’t matter when institutional investors can’t establish a significant position in such an illiquid stock… if they can even buy on the OTC or CBOE CA at all. And retail (generally) has no interest in this industry.

Just like any traditional commodity, if the overall industry sentiment is terrible, even with improving fundamentals… no one cares.

Additionally, there isn’t much Base could do to generate some excitement, even if they wanted to.

There is an evident lack of quality projects to buy into, given they haven’t invested in a new project since August 2023.

Even if they did, they have been looking into methodologies like biochar, which is unlikely to have an investable project with significant carbon credit volumes.

So, I see no reason to continue holding the stock at this point. The position has been beaten down to represent less than 5% of my portfolio now.

The opportunity cost has been immense, and I don’t think I’ll be rewarded for continuing to wait.

I hope they prove me wrong— soon, and that this company succeeds. Its management team is fantastic. They’ve made all the right decisions in a market sector that has been an absolute disaster.

Even if we get a buyout here, depending on the time frame, it might still be better to own Abaxx, Aduro, or any of the other companies I’ve profiled instead.

Allegedly, “known” insiders or large investors like Robert Friedland, Abaxx, or the management team hold ~80% or more of the share count.

That dramatically reduces the float.

At some point, all of the sellers could be exhausted through the share buyback program, and the stock could actually begin to move higher if buyers came in.

But again, I see no reason why any significant buying would occur.

As things stand now, there is no telling when the VCMs might turn around. Or when a buyout might happen.

It could take another couple of years, or it could happen tomorrow…

Either way, the stock is becoming increasingly irrelevant as it gradually becomes a smaller and smaller part of my portfolio. So, I think I would rather reallocate the funds at this rate.

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Lessons Learned

In theory, given the company’s success, this should’ve been my first publicly profiled stock to point to as a great investment. It deserves to be a 5-bagger, in my opinion— if not higher than that.

The fundamentals paint the real picture, but the stock price can take some time (if not many years) to catch up. I won’t hold my breath and wait any longer. There are hundreds of “cheap” stocks that never get recognized for a variety of reasons.

Ultimately, this has illustrated just how vital sentiment can be when looking into an investment opportunity.

Carbon credits are uniquely hated by basically everyone outside of a corporate setting. Probably even a lot of the people working in corporations.

There is no other way to offset emissions for a significant number of processes.

But the political left hates them because they don’t see credits as a “real” solution. The political right hates them for obvious reasons. Anything climate change-related is a scam.

Eventually, either carbon credits will start being used, or the climate change narrative will die. I would bet on carbon credits, but that doesn’t mean it will happen fast.

With my luck, they will announce a buyout tomorrow :)

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The owner of Green Investing is not a licensed investment professional. Nothing produced under the Green Investing brand should be construed as investment advice. My content is made for entertainment and educational purposes. Do your own research.